The 4% rule says people should withdraw 4% of their retirement funds in the first year after retiring and remove that dollar amount, adjusted for inflation, every year after. The rule seeks to establish a steady and safe income stream that will meet a retiree's current and future financial needs.

What is the 4% rule? The 4% rule is a popular retirement withdrawal strategy that suggests retirees can safely withdraw the amount equal to 4% of their savings during the year they retire and then adjust for inflation each subsequent year for 30 years. The 4% rule is a simple rule of thumb as opposed to a hard and fast rule for retirement income.

The 4% rule is a common rule of thumb in retirement planning to help you avoid running out of money in retirement. It states that you can comfortably withdraw 4% of your savings in your first year of retirement and adjust that amount for inflation for every subsequent year without risking running out of money for at least 30 years.

The idea behind the 4% rule is to withdraw roughly 4% of your savings each year, adjusting for inflation. By keeping withdrawals low, the 4% rule—or a similar strategy—helps ensure you don’t run out of money in retirement.